Texas – Exemption Updates, Tax Relief for Fire Victims, and Sales by Federal Agencies

SALT Report 1133 – A newsletter by the Texas Comptroller discusses prior contract exemptions, obtaining a registration number for exempt agricultural or timber-related products, sales by the federal government, and tax relief for Texas wildfire victims.

Prior Contract Exemptions

The Texas Legislature did not provide for any prior contract exemptions in the 2011 bills. Therefore, the comptroller has no authority to recognize any exemptions based on contracts that existed before the effective date of any changes in the taxability of items.

For example, S.B. 1, Laws 2011, made changes to the types of items that qualify for a resale exemption. Items purchased under a contract existing before the effective date of S.B. 1 that qualified for a resale exemption will no longer qualify after S.B. 1 took effect on October 1, 2011, if the law regarding those items was changed.

Registration Requirements for Agricultural and Timber Operations

Beginning January 1, 2012, a purchaser claiming a sales tax exemption on certain items used to produce agricultural or timber products for sale must provide a new registration number on the exemption certificate provided to the supplier. The newsletter discusses how to apply for a new registration number, who is eligible to receive a registration number, what purchases require a registration number, qualifying farm or timber vehicles, and new exemption certificates for agricultural and timber operations.

Sales by Federal Agencies and Instrumentalities

Under federal law, states may not require the federal government or its agencies to collect or remit sales and use tax. However, this exemption does not apply to concessionaires and other independent contractors who operate on federal land. These individuals must hold a Texas sales and use tax permit and collect and remit sales tax.

The federal government and its agencies and instrumentalities may voluntarily collect and remit Texas tax.  If a federal agency does not collect Texas tax, the responsibility of reporting and remitting the tax shifts to the purchaser. The American National Red Cross, its chapters, and local units are not required to collect sales tax.

Tax Relief for Texas Wildfire Victims

Governor Perry issued an emergency proclamation on September 1, 2011, declaring a disaster in all 254 counties in Texas. As a result, taxpayers who have property damaged by a wildfire that occurred in Texas on or after May 13, 2011, or within one of the counties included in the disaster proclamations previously issued between December 21, 2010, and May 13, 2011, may claim an exemption from sales tax on labor charges to repair the damage.

The exemption applies only to charges for labor to repair or restore damage caused by a wildfire. Materials and equipment used in performing the repairs continue to be taxable. Purchasers must give the seller an exemption certificate identifying the item(s) being repaired and the reason for the exemption.  For example, “Repair to….. (property damaged) due to natural disaster in…..County, Texas.”

For Further Information:

Texas Comptroller of Public Accounts Tax Policy News